Wall Street Breakfast: Japan's NTT To Acquire Dell's IT Services Arm

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Includes: AAPL, AMZN, AVP, BT, DGRLY, DPSGY, DVMT, FXCOF, HSBC, MSFT, NBL, NTDTY, NTT, NVS, QQQ, RDS.A, RDS.B, SHCAY, SPY, TWX, YHOO
by: Wall Street Breakfast
Wall Street Breakfast
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Japan's NTT Data Corp., a subsidiary of Nippon Telegraph & Telephone (NYSE:NTT), has agreed to buy Dell's IT services unit for $3.05B, marking one of its largest overseas investments in recent years. The transaction will help NTT (OTCPK:NTDTY) strengthen its footprint in North America, and would allow Dell to raise cash to help finance its $67B takeover of storage vendor EMC Corp. (EMC). Dell's IT consulting division, formerly known as Perot Systems, was sold to Dell in 2009 for $3.9B.

Economy

China's industrial profits returned to growth in the first two months of 2016, despite weakening business conditions and slowing economic growth. Profits in January and February combined rose 4.8% to 780.7B yuan ($119.8B), following seventh straight months of decline. Meanwhile, China's massive pension fund is likely to start investing in the mainland's A-shares this year, a move that could see 600B yuan ($92.1B) moving into the country's equity markets. The fund, which manages almost 90% of Chinese social security deposits, can currently only invest in treasuries and bank deposits.

Myanmar's baby step toward a modern financial system has received a big thumbs up, with investors standing in line to buy shares of the country's first listed stock. First Myanmar Investment leapt as much as 19% on the new Yangon Stock Exchange from the issue price of 26,000 kyat ($21.50) when trading began on Friday. The listing represents an important step for the former pariah state, which is slowly working to open up its economy following decades under military rule.

At least 70 people were killed and hundreds more injured in an apparent suicide bombing at a Pakistani park on Sunday that was aimed at Christians celebrating Easter. A Taliban faction (that once declared ties with Islamic State) claimed responsibility for the attack in Lahore, a city in the eastern part of the country. Meanwhile, Belgian authorities have charged Faycal Cheffou with murder in connection with Tuesday's Brussels attacks, suspecting him of being the terrorist who fled the airport after the deadly suicide bombings.

The campaign for Britain to leave the EU is now being backed by 250 business leaders, including the former chief executive of HSBC, as big bosses debate the economic impacts of a Brexit ahead of a June 23 referendum. Last month, the heads of more than a third of Britain's biggest companies - including Shell (RDS.A, RDS.B) and BT - said leaving the EU would put jobs and investment at risk. British pound +0.4% to $1.4179.

Congress will soon decide whether to shield cash-strapped Puerto Rico from investor lawsuits while the island maps a plan to resolve its financial crisis. Republican leaders who control Congress agree with the Obama administration that an independent review board should mediate disputes between creditors and the territory's officials, but lawmakers disagree over whether investors must put lawsuits on hold in the meantime.

Bernie Sanders swept all three Democratic caucuses on Saturday, with decisive victories over front-runner Hillary Clinton in Washington, Alaska and Hawaii. Despite the delegate gains in the Pacific contests, Sanders still trails Clinton by a significant amount, but he pledged to keep fighting on. Weekend news from the GOP: Presidential front-runner Donald Trump doubled down on his criticism of NATO, a cornerstone of U.S. foreign policy for decades, and stated that allies must start paying for "American protection."

Hoping to avoid a costly ballot fight, California lawmakers and labor unions have reportedly reached an agreement to raise the state minimum wage to $15 an hour gradually by 2023. The deal, if passed in the state legislature and signed into law by Governor Jerry Brown, would add to a wave of minimum wage increases at the state level in the U.S., where the federal minimum wage has remained at $7.25 an hour for more than six years.

Stocks

Silicon Valley's battle over encryption is heading to Europe. The FBI's demands that Apple (NASDAQ:AAPL) help unlock an iPhone used by a mass killer in California has opened a heated debate on privacy in the U.S., but recent attacks in Brussels and Paris are having governments across the EU pushing for greater access to people's digital lives. This week, French lawmakers are expected to debate proposals to toughen laws, giving intelligence services greater power to retrieve personal data.

Expectations are high that Sharp may sign a long-delayed takeover deal with Foxconn (OTC:FXCOF) this week. According to the Taiwan stock exchange, Foxconn will hold a board meeting on March 30 as scheduled, where it will likely discuss the transaction depending on the stage of negotiations. Sharp (OTCPK:SHCAY) aims to reach an agreement as soon as possible, and will promptly make information public if it reaches a decision requiring disclosure. Sharp shares closed up 4% in Tokyo.

Amazon is preparing to launch a two-hour delivery service in Berlin, according to Germany's Welt am Sonntag. Although it has used Deutsche Post's (OTCPK:DPSGY) DHL parcel service for local deliveries in the past, Amazon (NASDAQ:AMZN) is slowly building up its own distribution capabilities, as it aims to create a cost-efficient logistics system. Deliveries would start in May, and would at first be carried out by courier firms already active in the German capital.

Avon Products is close to a deal with activist investors, in which it will add a new independent director to its board in exchange for them backing away from a proxy fight for more board seats. The agreement with Barington Capital and NuOrion AG Partners could be announced as early as this morning. The move comes after Avon (NYSE:AVP) announced a 7% reduction in its workforce to pacify PE-backer Cerberus and other key investors.

Are things getting serious? Microsoft (NASDAQ:MSFT) has been meeting with private equity firms, saying it might lend "significant" financing to a bid for Yahoo (NASDAQ:YHOO), sources told Re/code. The troubled Internet company could want $10B for its core business many price at $6B-8B. On Friday, activist investor Starboard Value followed through on launching a proxy challenge with its own board slate amid complaints about Yahoo's sales effort.

Microsoft is also "deeply sorry" for the racist and sexist Tweets generated by the so-called chatbot it launched last week, after the artificial intelligence program went on an embarrassing tirade. MSFT's bot, known as Tay, was designed to become "smarter" as more users interacted with it.

More Microsoft news... The tech giant is busy with preparations for its annual Build conference, which is set to begin Wednesday. The gathering will see the Microsoft (MSFT) once again press its case for a Universal Windows Platform, or applications that work across any Windows device.

Partners in Israel's offshore Leviathan natural gas field are calling on the government to quickly resolve remaining regulatory uncertainty after the Supreme Court struck down an agreement on the project's development. The objection was due to a clause that would have prevented major regulatory changes for 10 years, which was inserted to encourage investment. The government, last year, reached a deal with Noble Energy (NYSE:NBL) and Israeli partner Delek Group (OTCPK:DGRLY) that would leave them in control of the gas trove, while forcing them to sell smaller, yet sizable, assets.

The U.S. is asking Novartis to provide a decade's worth of records for about 80,000 "sham" events in which the government says doctors were wined and dined so they would prescribe the company's cardiovascular drugs to their patients. According to the filing, Novartis (NYSE:NVS) allegedly provided illegal kickbacks to healthcare providers through bogus educational programs at many high-end restaurants and sports bars, where the drugs were barely discussed.

In the battle of Batman and Superman, the winner appears to be Warner Bros. The Time Warner (NYSE:TWX)-owned studio ended a prolonged slump at the box office this weekend with the release of Batman v Superman: Dawn of Justice. The film grossed an estimated $424.1M worldwide, recording the fourth-largest global opening in box-office history; $170.1M of that came from the U.S. and Canada, the sixth-biggest domestic opening of all time.

Today's Markets

In Asia, Japan +0.8% to 17134. Hong Kong closed. China -0.7% to 2958. India -1.5% to 24966.
In Europe, at midday, London closed. Paris closed. Frankfurt closed.
Futures at 6:20, Dow +0.3%. S&P +0.3%. Nasdaq +0.4%. Crude +0.8% to $39.77. Gold -0.4% to $1217.
Ten-year Treasury Yield +2 bps to 1.91%

Today's Economic Calendar

8:30 International trade in goods
8:30 Personal Income and Outlays
10:00 Pending Home Sales
10:30 Dallas Fed Manufacturing Survey
1:00 PM Results of $26B, 2-Year Note Auction

Companies reporting earnings today